An increase in the money supply will lead to an increase in equilibrium real GDP only if:

Question

Quizplus · Accepted Answer

If the aggregate supply curve is not vertical, an increase in the money supply will shift the aggregate demand curve to the right, leading to an increase in equilibrium real GDP. This is because an increase in the money supply leads to lower interest rates, which stimulates investment and consumption spending, increasing aggregate demand. However, if the aggregate supply curve is vertical, an increase in aggregate demand will only lead to higher prices, with no change in real GDP.

An Increase in the Money Supply Will Lead to an Increase